From the Issuing Firm's Point of View, One Advantage of Preference

question 56

Multiple Choice

From the issuing firm's point of view, one advantage of preference shares over bonds is [blank].

• A)preferred dividends are a deductible expense for tax purposes
• B)preferred voting privileges concentrate power in the hands of managers and major shareholders
• C)a dividend payment can be skipped without triggering bankruptcy
• D)bonds don't have a maturity date, whereas preference shares do

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Definitions:

Adjustable Maturity Dates

Adjustable maturity dates refer to the flexibility allowed in the due dates of financial instruments, allowing for changes in the repayment schedule.

Floating-Rate Bonds

Bonds with variable interest rates that adjust periodically based on a benchmark interest rate or index.

Coupon Rate

The interest payment made annually on a bond, shown in percentage terms of its face value.

Time To Maturity

The duration remaining until the final payment date of a loan, bond, or other financial instrument, at which point the principal (and usually the final interest payment) is due to be paid.